Forensic audit reveals misuse of funds, $3 million unaccounted for

Friday

Nov 16, 2007 at 2:00 AM

NEWMARKET — The much-anticipated forensic audit was made public late Tuesday afternoon and auditors found "the internal accounting control system then employed by the previous Town Administration was systemically flawed."

Melissa Lattman

NEWMARKET — The much-anticipated forensic audit was made public late Tuesday afternoon and auditors found "the internal accounting control system then employed by the previous Town Administration was systemically flawed."

The nine-page audit summary highlights allegations such as using town funds for personal expenses including a six-week body makeover, shredding of documents without apparent backup, overpayments on vendor invoices, payroll payments in excess of employment contract compensation and $3 million in fixed assets without a clear picture of what the items are.

The forensic auditor, Graham & Graham of Springfield, Vt., reviewed more than 3,000 documents in its audit of the fiscal year from July 1, 2005 to June 30, 2006.

The auditor wrote a 300-page report of findings with more than 2,000 questioned transactions. This documentation will be available at Town Hall for examination.

The town's attorney, Peter Taylor of McNeill, Taylor & Gallo, is in the process of forwarding the audit report to the state attorney general's office for determination if criminal charges against the town administrator or others would be filed.

The auditor found the town's credit card environment "dangerously flawed." One example the auditors gave was former finance director Melodie Hodgdon allegedly placing $10,000 on a credit card in former town administrator Alphonse Dixon's name with Hodgdon then using the money for her own educational expenses but posting the payment as for the Recreation Department accounts, according to the auditor's report.

A charge also appeared for a "six-week body makeover" on a Newmarket credit card assigned to Al Dixon. Dixon told the auditor he did not know anything about the charge, "although he was charged with approving, on behalf of the Town, this obligation." Hodgdon admitted to the auditor that she had the card with Dixon's name on it but she did not know who ordered the charges.

"Both parties signed off on the payment of these charges instead of questioning who authorized the charge. Did not receive a satisfactory response to my request for the true details behind the makeover which appear to have been for the pecuniary benefit of Melodie Hodgon.

Ultimately the town of Newmarket, N.H., paid for this personal benefit charge," the auditor reported.

"Many of our findings associate payments with benefits to an individual employee and not to the town of Newmarket" Then it lists examples, one being, "payments for mowing of fields at the Black Bear TIF project, which was well in excess of traditional costs to the town. Dixon did the mowing.

The audit of fiscal year 2005-06 came about because of a November 2006 resident petition requesting a comprehensive audit of the town's procedures with the departure of Hodgdon last December and the then impending departure of Dixon, after 10 years as town administrator.

Getting the forensic audit was an uphill battle, Town Council Vice Chairman Dana Glennon said. "I feel vindicated because of what myself and the petitioners did," he said. "(It's) unfortunate it took such a long time and such a great expense."

Glennon said he made a Freedom of Information Act request for the 2005-06 vendor list that revealed areas of concern with large amounts of money paid. After requesting backup documentation Glennon said he found lots of things hand-written and lots of discrepancies.

Town Council Chairman Brian Hart said the audit findings are disturbing and upsetting. Hart admitted to not fully understanding the citizen's audit request.

"I felt it was already done with the annual audit," Hart said.

After the policy and procedures audit by Municipal Resources Inc., revealed issues, Hart said he "wanted to do the forensic audit to clear the air." From the forensic audit Hart expected ideas on improving financial processes.

Instead there were three main surprises for Hart: The lack of supporting documents for transactions, apparent misuse of funds and the existence of a contract for Hodgdon's work instead of her being an employee as council thought.

In June 2005, Hodgdon apparently entered into an agreement authorized by Dixon, which allowed her access to her state retirement account, according to the report. She still apparently received employment benefits such as leave time, benefits and paychecks every other week.

The forensic auditor believes the forensic audit would not have been needed if the former annual audits by the "Mercier Group had performed in accordance with its professional standards of care and due diligence. If the Mercier Group had provided the proper field work and planning and reporting of your suspect internal accounting control system and the apparent lack of diligence by your former town administrator and finance director, the town would have received notification of the above noted problems," as reported by Graham & Graham.

Fees for the work of the audit are almost $90,000 so far. Hart said town council plans to try to recoup the expenses as well as funds used by town employees for personal expenses.

Advertise

Original content available for non-commercial use under a Creative Commons license, except where noted.
seacoastonline.com ~ 111 New Hampshire Ave., Portsmouth, NH 03801 ~ Privacy Policy ~ Terms Of Service